This piece was originally published on Johnny's blog, Granola Shotgun, and is reprinted here with the author's permission.
I was recently interviewed and asked what might happen to the stagnant poorly aging neighborhoods that are neither verdant and exclusive like the most desirable suburbs, nor vibrant and urbane like rapidly gentrifying city centers. My response was straightforward. They probably won’t be retrofitted and made more urban. And they probably won’t be retrofitted to become more rural and select. They’re basically stuck as they are for the duration. The best thing that could happen to them is for enough people to decide that instead of being the worst of both worlds, they’re actually a really sweet spot at a bargain price. I stumbled on this post war ranch for sale in just such a location in New Jersey and thought it would be a good case study.
Here’s the context so you get the complete picture. This suburb hasn’t held up well over the years. It’s typical of places all across the country that were leapfrogged as the prosperous middle class migrated to the next new place slightly farther out or boomeranged back to the city. It isn’t a terrible place. It isn’t a high crime area. It isn’t depopulated. The housing stock is serviceable enough. It has ready access to all the same jobs, culture, and opportunity as anyplace else in the metro region. It’s just… drab.
Fifteen minutes away in one direction is a different municipality and school district where the homes are a generation newer, much larger, and the subdivisions are buffered by more nature and open space. It’s hard to find a house in this area for less than $260,000.
Fifteen minutes away in the opposite direction is a thriving city neighborhood where condos sell for north of $350,000. Hipster cafes, brew pubs, boutiques, and bicycles abound.
So let’s go back to the lackluster ranch house. It’s on the market for $46,500. Think about how much more money you might have on hand at the end of every month if your rent or mortgage were a few hundred dollars instead of a couple thousand. Or what if you didn’t have a mortgage at all?
Here are examples from Atlanta and Portland. This kind of house can be made as comfortable and fashionable as the owners like on a fairly tight budget. Some paint, a little trim, and landscaping can be transformative. Compare this home to a suburban garden apartment or a studio in the city. Pound for pound this place is the best value for money anywhere in the region.
Yes, the public schools are mediocre – largely because they’re occupied by children of the less affluent. (That’s the true standard of a “good” school. Who will your kids rub shoulders with…) But if you don’t have school aged kids, which is true for the majority of American households these days, that may not matter to you.
And there’s the tricky business of resale value. If you buy a home in the “wrong” location the value may never increase the way it might in a more upscale area. But there’s a different way of thinking about real estate. Instead of filtering a purchase through the lens of future investment potential it’s possible to think of a house as… well… a place to live. You know – a roof, four walls, warmth… In this case you’d be getting all those things at a $200,000 to $300,000 discount relative to what else is on offer just a few miles away in either direction.
There has to be a financial adviser somewhere who will back me up on this.
(All photos taken by the author)